Good morning and welcome to our second quarter 2025 webcast for Reach Subsea ASA. Our report and presentation were released this morning. I am Jostein Alendal, CEO, and I'm here with our CFO, Birgitte Bendriss Johansen. I will start with the key highlights and some of the achievements from the quarter. Additionally, I will show how we are positioned for both navigating in a dynamic market as well as growth. Also, an update on our Reach Remote progress. Birgitte will then cover our financials more in detail. Please submit questions via the webcast player. We will address them in the Q&A session after the presentation. Our second quarter results are weaker than last year and not up to our ambitions, of course, and this is mainly due to lower utilization of assets.
Annoying enough, in the second quarter, we have seen some idle periods for some of our vessels in a market that is more conscious. We have all experienced the ongoing geopolitical turbulence, and naturally, this also makes its way to our industry. We are facing a conscious market in a world that continues to shift, where some decisions are put on hold and activities are postponed. This is also reflected in our order backlog and tender volume, which is slightly down compared to last year. However, the long-term outlook is good. The CapEx outlook for next year and beyond remains sound, and the OpEx activities maintaining existing offshore infrastructures will continue and also increase. Hence, we are a stable and resilient part of our business for the years ahead. Also, our services offering and capabilities remain highly relevant across all offshore industries.
Although the financial performance of the quarter is weaker, our half-year results for 2025 are all-time high. We stay focused on our strategy on building a global company with investments for the future, and at the same time, navigate in the present market with all its movements and changes. Bumps in the road should be expected, and cost of vessels and vessel commitments are our biggest cost elements, and I will highlight the flexibility we have in our fleet. Our business model is based on leasing demand vessels rather than ownership. Partly ownership is reserved for a few strategic core assets. The fleet structure provides us with a good predictability through a combination of fixed agreements and profit share models. The options give us flexibility to replace vessels or reduce the fleet if deemed appropriate.
Our charter agreements have also cost-effective rates compared to current market prices, which is also reflected in the options. The two new IMR vessels scheduled for delivery in 2026 and 2027 represent modern technology, especially on the fuel side. Whether these vessels will expand the current fleet or replace existing vessels remains to be seen and depends on the market situation. There is nothing to suggest that a fleet downsizing is necessary given today's market outlook. However, if that situation were to change unexpectedly, we are well positioned and can reduce tonnage on a short notice. Based on this, we have a strong and flexible position with the ability to adapt to market changes in the coming years. The Reach Remote One and Reach Remote Two, which has now joined our fleet, are key growth enablers. I will come back to this in a bit.
Further, flexibility in fleet is one thing. Our ability to sell services across sectors adds on to the overall flexibility. Our services are in demand both in well-established markets like oil and gas and wind and in new growing sectors. What all these markets have in common is that the client's assets need to be planned, installed, operated, monitored, and eventually decommissioned in the ocean space. Our services support all of these phases and can be divided into three main categories: IMR services, that is inspection, maintenance, and repair, as well as light construction work. Uptime on production is a top priority for our clients, and we provide efficient solutions to help them with that priority, which is why they keep coming back. Framework agreements and being an approved supplier are essential in this segment. Survey ane inspection services involve collecting and processing data from the seabed and subsea installations.
The client receives fully processed deliverables such as maps, 3D models, and reports that support their decision-making. These services are offered both independently and increasingly as integrated solutions. In the monitoring segment, we have built strong expertise in geological monitoring using our own unique technology, which is especially well suited for detecting changes in gas and CO2 levels in reservoirs. It might not be widely known, but we monitor about 80% of Norway's gas production today, and we are now exporting our concept to other regions with extensive gas production. The contract with Woodside in Australia is a good example there. Another example from this quarter where we use the same methods and technologies from typical oil service in other segments.
Late spring this year, our team took a deep dive to investigate the wreck of the Second World War German submarine, which rested at 160 meters of water off the coast of Norway. We provided the Norwegian Coastal Administration with updated data at a resolution not seen before at this site. Using a remotely operated vehicle, our team conducted a high-resolution survey and data gathering of both the wreck and the surrounding area. All the collected data and more than 160,000 images were processed using our in-house developed workflow to produce the highly detailed 3D model of the wreck you can see here. We also mapped the subsurface using a combination of standard sensors and new electromagnetic system technologies. This is to be able to give a better estimation of how deep the wreck is buried below the seabed surface.
These detailed 3D models give the client an accurate and in-depth know-how of their subsea assets. Either a wreck as here, an oil and gas or wind installation, we produce highly efficient inspection, data collecting, and processing. Over to even more technology for the future. Finally, we can also present Reach Remote One and Two in our operational fleet. The Reach Remote investment is a good example where we address both the current and the future. Following a successful pilot, Reach Remote One has completed commercial campaigns in the North Sea. The survey and IMR work for Equinor and TotalEnergies further validates her position as a safe, efficient, and cost-effective alternative to manned vessels. Further, she is now on a job for Shell on the Ormen Lange Field for the next four weeks.
This validation reflects not only the vessel's technical functionality but also the strength of our teams who successfully plan and execute campaigns from onshore control centers. With this, we have also demonstrated an extremely short way to market with a new concept. Adoption of new technology goes hand in hand with maintaining high standards in project execution and client satisfaction. During the offshore work, we have been operating with an assisting vessel, but this is expected to leave the scene as soon as the final documentation of the validation is processed by DNV and the maritime authorities. The phase of technical development in remote operations is accelerating, with successful jobs driving further demand for expanded work scopes and added functionalities. This includes both tooling specialized for unmanned operations and enhanced communication and software capabilities. Reach Horizon, our in-house developed virtual operation system, is emerging as a key standalone product.
Originally designed for Reach Remote and now deployed across conventional vessel operations. While Reach Remote One has received its share of fame, her twin sister Reach Remote Two has prepared for her own journey. She is also now ready for commercial operations and is now on her way to Australia for the first job for Woodside on the Scarborough field this winter. Our plans to scale up the fleet with more units and establish Reach Remote in all time zones continue as the concept is no longer questioned. It's a proven solution for subsea and maritime operations now and into the future. I will hand over the word to Birgitte, who will take you through our financials.
Good morning. Thanks for listening in to our webcast. Remember that you can write questions in the chat while we speak. If we start by looking at the second quarter isolated, our utilization was somewhat lower than previous second quarters. Revenue was NOK 684 million with a 13% EBIT margin compared to NOK 623 million revenue in Q2 with a 19% EBIT margin. Year-to-date results are strong due to an exceptionally strong first quarter, and we have all-time high revenue of NOK 1.4 billion compared to NOK 1.2 billion in the first half of 2024. Pre-tax profit for the second quarter was NOK 88 million compared to NOK 111 million in the second quarter last year. In June, we took delivery from the yard of the Reach Remote Two after a successful pilot and startup of commercial operations for the first USV.
The first half 2025 cash flow is heavily impacted by investments, which includes mobilization related to these assets. Cash per quarter end was NOK 170 million, and our net interest-bearing debt, excluding the IFRS 16 leasing commitments, was NOK 122 million. Our increased debt per quarter end is related to the investments in Reach Remote, which are financed with bank loans. After quarter end, on the 2nd of July, we closed a bond loan of NOK 500 million, the first in Reach history. We're very pleased to recognize that the market showed great interest in participating in the bond, as this was an important milestone for us to diversify our capital funding sources. These graphs illustrate Reach's financial development the last eight years on a rolling 12-month basis.
We've had a substantial revenue growth, a result of increased activity with new technology and assets and expansions to new business segments and regions. Our M&A activity has contributed strongly to our performance and ability to offer integrated projects to our clients. By increasing the capabilities of the vessels, we have grown both our revenue and profits steadily over time. Going forward, we have good flexibility of growing our fleet with Reach Remote One and Two and the other vessels, modern tonnage with many opportunities on the tendering side. We have focused on a sustainable and profitable growth, and our operating results and pre-tax profit have to a large extent improved in line with the revenue growth, as you can see on the graph. Let's look at the revenue mix split between segments, sectors, and regions in the quarter.
Our second quarter turnover from renewables and other sectors was 41%, while projects in the oil and gas sector represented 58%. We also split our revenue on our two major market segments, data and solutions. The split here is not 100% academic, as we experienced that quite a few projects include both segments. Solutions refers to a service project where we do installments, maintenance, repair, decommissioning, and etc. Data is where we deliver a data package to the client, typically a survey of a pipeline, seabed, cable route, positioning, inspection, and so on. The last year, we've had substantial investments in technology development within the monitoring, survey, and data, which we expect to see the results of in our financials in the coming years.
In Q2, about 77% of the turnover came from solutions due to a few larger service contracts, including a high number of vessel days, while 23% came from data. We also present our geographical distribution of turnover to illustrate our strategic expansion to new areas, as well as meeting new and existing client needs. In the second quarter, activity in Europe, including Norway, represented about 65% of our revenue compared to 78% last year. Over to our balance sheet, we continue our sustainable growth also into 2025, balancing cash and working capital and debt with a robust equity level. We have a cash and working capital position of just about NOK 450 million. As mentioned, taking delivery of the Reach Remote and other investments has increased our debt to financial institutions.
Our commitment related to active charter parties, hence our IFRS 16 leasing liabilities, has been reduced in the goldens with remaining time on charter parties. The equity share is almost 40% of the total balance sheet as per quarter end. Reach is well positioned for the remaining investments in Reach Remote and vessel and equipment mobilization for our fleet in order for us to have all vessels ready for integrated subsea and survey projects, as well as the planned scale-up for the Reach Remote units. We use sustainability and ESG focus as a foundation for profitable growth in line with our strategic goals and KPIs. On the environment and safety side, we have had a good start of the year with no major spills or major accidents. Unfortunately, we had two LTIs this quarter, but we are very glad that our colleagues are fully recovered and back at work.
We are investing heavily in remote operations and a modern, environmentally friendly fleet. As part of working more remote, we rely more and more on digital security, and therefore we have put cybersecurity high on the agenda together with the ISO 27001 certification. We work continuously with improvements, focusing on compliance, but also nature-related risk impacts and opportunities, and are establishing our own Reach Academy for internal development for our colleagues. Thanks for listening. Jostein, I give the word back to you for a summary before we continue with the Q&A session.
Thank you, Birgitte. In summary, Reach Subsea is well positioned to capture market opportunities ahead. With a strong presence across the world, we bring recognized subsea expertise to our global market. The long-term outlook remains promising, driven by investments in energy and infrastructure across oil and gas, offshore wind, subsea cables, and emerging sectors like carbon storage and environmental monitoring. Strategic growth initiatives are well underway, supported by long-term and flexible vessel capacity, a growing footprint, and remote capabilities through Reach Remote. We are constantly delivering excellent services with a solid operational track record, efficient project execution, and optimized asset utilization. Technology innovation is at the core of our strategy. Our leadership in marine robotization and remote operations continues to drive efficiency, scalability, and sustainability. Financial strength and sustainability remain a priority. Our performance enables smart investments, disciplined expansion, and a shareholder-focused growth path.
Backed by a highly skilled team and a commitment to continuous improvements, we are set to deliver exceptional services, strong results, and accelerate the shift towards next-generation subsea operations. Let me conclude the presentation with our saying, "Everything within Reach." Please continue to submit your questions in the webcast player, and we will return shortly to answer them.
Yeah, I see we have received quite a few questions already. You can continue writing questions in the chat while we speak. We'll try to answer everything as good as we can. The first question is for you, Jostein. Can you say something about the duration and scope on the Reach Remote Two contract in Australia?
Yeah, that's estimated to be a couple of months, 60-70 days on the field.
Yep, thanks. The next one is regarding the cash position, which was reduced in the second quarter. There's a question on what the cash position will be in Q3. I guess I can answer to that. As you know, we raised the bond loan of NOK 500 million in July, early July. Of course, that will positively affect the cash position. This development in the cash position was according to our plan. We had a very strong cash position, but that was to be prepared for taking the investments in Reach Remote and the other mobilizations that were done. It wasn't a surprise for us. The next one is for you, Jostein. Reach Remote has been active in this quarter, mostly accompanied by a larger vessel. When will it be feasible for Reach Remote to operate independently?
I guess that's just around the corner. As I said, a huge number of documents to be processed and so on. We have said the next couple of weeks a couple of times, but we are still there. Just remember, this is the first in the world of this size unmanned vessel. There is quite a sort of absorbed amount of documentation needed to say, yes, this is without. In the next, I'll say again, in the next couple of weeks.
Thanks. The next one is also for you, Jostein. How can the market shift so quickly? What kind of work is shifting to the right?
I think the turbulence in the wintertime and some strange precedents, some tariff trade wars, and everything is inflicting on us as well. Not such a surprise, but I think when you shift work or postpone work, it's just going to end up in the fourth quarter. We have seen that before many, many times over the years. It's just a normal turbulence when big things are happening.
Thanks. The next one is also on Reach Remote. It's a question of duration, but there is another one. How's the outlook for additional work in Australia for Reach Remote?
Oh, quite good. Actually, I forgot to mention that because the outlook is 100% annual utilization when you first start. We have several clients. We try to line them up, so to speak, but there is a lot of work in the pipeline in that region. It has been a long-term strategy for us to establish in all time zones. This is the first step in that long-term strategy.
In the Q1 report, you mentioned that the order of Reach Remote Three and Four would be placed by mid-summer 2025. Has this been done?
No, not yet. It's in the plan, but not yet.
Yes. I guess the next question is a little bit related. Does the company have any plan to place the loan of NOK 500 million until you need it? I can confirm that, yes, there is a plan. We cannot disclose all the details there yet, but there is definitely a plan for placing the money until we need it. Do you have any details regarding the scale-up speed for remote vessels going forward?
The scale-up, the speed of the numbers is also dependent on clients. We are talking with a lot of clients for the number Three and Four. It's always a good thing to have some firm and fixed work in the order when it comes to ordering new vessels. The speed will accelerate. We have seen that just the past three, four months when we have been doing work in the North Sea and proved that, yes, the concept is working. The vessel is solid, it's safe, it's working, and it's doing the job. I don't know. The speed of scaling up is a bit dependent on the speed in the coming months, I would say. In the long term, our plan is to have Reach Remote vessels, unmanned vessels in all time zones and markets. The numbers, I don't know. We will end up with 10 or 20.
Time will show.
Yep, exciting plans. Looks like a lot of subsea vessels from the traditional vessel owners have become available in the late part of the summer and into the fall. How do you see the pricing being impacted by more competition?
There is a slight impact on the pricing, but amazingly, the pricing of vessels remains high. It is just the vessels coming from the offshore wind. Offshore wind activity is quite down at the moment. This will sort of change. The dynamics of the market is the same, but the pricing is holding a level.
Yep. Can you talk about the long-term economics of the remote? What does fully utilization look like in terms for revenue? Will the OpEx reduction mostly benefit the client, or will it also increase Reach's margins? When will the investment decision for Three and Four be made?
I think we are not guiding it, are we? No, we are not going to give all the benefits away to the clients, of course. There is a duration there. I think I comment on the speed on scaling up. It's nearby.
Yep. There's a question on the order backlog. The order backlog has been decreasing for four quarters in a row. Is the total market hesitating, or do your competitors take market shares?
I can comment on or elaborate on the order book. Our firm order book, as we show it, does not include additional call-offs and extensions and so on. We know and we have more work within the frame contracts now than previous years. When our clients are a bit reluctant on giving out the call-offs and so on, it's just a matter of time, and it will come. Our firm order backlog is more the more conscious a sign-off for the conscious clients. The extensions and additional call-offs we get, it's normally twice the size of the firm order book. We have seen that in previous years. We have a firm order book of NOK 1 billion, and we end up with NOK 3 billion in revenue. There's a dynamic there as well. I'm not that scared of that. It's just the nature of it.
Yep. There's also a question on the order backlog and also the tender volume related to sectors and segments and so on, for example, data versus solutions and geography mix. Is there something we can say about that? Elaborate more?
The complex projects, because we are getting better and better in gathering data and also process. The tender volume is more complex now than maybe a couple of years ago where we had more of the ROV services and vessel only. Now we are more into more sophisticated tenders. It's globally, yeah. It's nice to see that we expand to other regions.
Absolutely. Those of you following the marine traffic can see with the MSR at all times. You will also see there that we have expanded our geographical footprint quite significantly. That's exciting. The next question is on Reach Remote One. What will she be doing after the Shell contract?
We have lined up some work there. It remains to be announced, hopefully in the North Sea. There is quite heavy interest in other parts of the world, so it is quite exciting. We have to make some decisions.
Yeah. Based on your outlook comment and your backlog, do you expect a better second half than the first half? I guess the answer to that is still that we don't guide on results. Fortunately, no disclosures there. The next one is on Reach Remote. Jostein, will you make any significant changes for the next Reach Remote units?
No, no. The vessel itself has shown that it is quite an effective tool. The size, capacity, and capabilities are spot on. I think we hit the target there. The next two will be the same size.
Yes. When the final improvements on Reach Remote One are in place, can Northern Maria be totally freed for its own projects?
Yes, that's the plan. That's an easy question.
Are you looking into renegotiating rates on chartered investors to be more competitive in the current market?
Yes, we can do that on the options. Remember, our charter parties are a couple of years old. The rates we have and the models we have are quite competitive even if you're going to call it a software market. The historical charter parties are still very competitive.
What is needed to push the button for Reach Remote Three and Four?
Yeah. I would like to have a fixed charter party for my client, of course. That's me. We have a lot of different solutions around that. It's close to a decision on the scale-up.
Yep. There's one final question. You stated good utilization on oil spreads in the second half of 2025, but it looks like Triton has been idle the entire Q3 so far. Please explain.
Okay. 77% utilization is not good. Sorry about that. It should have been, we like to be around 90%. We had some idle times, and that's annoying in the second quarter. It's also the dynamics in, yeah, we bet on locations and then air with us, and then it's not there. We have managed to move the vessels to other regions and so on. Unfortunately, some idle times in the second quarter. We haven't experienced that for many years. In the big picture, it looks promising. The activity in the next year will be much higher, yeah, all over in the market.
Yeah. There popped in one final question. What was the estimated EBIT impact from Northern Maria being tied up with Reach Remote in Q2? I don't think we disclosed the details around each vessel, so we'll keep that undisclosed for now. Okay. That's it. Thank you very much for listening in, and see you next quarter.
Yep.